Category: Corporate & Commercial Law

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Corporate & Commercial Law Corporate Governance & Contracts

A Wayward Emoji and the Fundamentals of Business Contracts

In the digital age, our methods of communication have evolved drastically, with emojis becoming a staple of modern conversations. But what happens when these simple symbols take on significant legal meaning? A recent decision by the Saskatchewan Court of Appeal has drawn attention to the power of emojis, specifically the thumbs-up emoji, in the context of contract law. This groundbreaking case demonstrates that even the most casual-seeming forms of communication can carry serious implications, including being interpreted as acceptance of a binding agreement.

The Emoji Case: A Flaky Batch of Flax

An Emoji is defined as “a small digital image used to express an idea or emotion on social media, on the internet, in emails, etc.” One emoji in particular became the focus of South West Terminal Ltd. v Achter Land, a 2023 case at the Court of King’s Bench in Saskatchewan between two agricultural companies, Achter Land & Cattle Ltd. and South West Terminal Ltd.

South West Terminal sent a text message containing photos of a proposed $58,000 contract to purchase flax from Achter Land. Achter Land responded to the message with a thumbs-up “👍” emoji. South West Terminal assumed the emoji denoted that Achter Land had accepted the contract.

But Achter Land never delivered the flax.

Achter Land later argued that they had not accepted the contract, despite the infamous emoji. South West Terminal sued them for breach of contract under section 6 of Saskatchewan’s The Sale of Goods Act and won.

Can an Emoji Create a Binding Contract?

Achter Land appealed to the Saskatchewan Court of Appeal, hinging on the question of whether an emoji can create a legally binding contract.

The Court of Appeal upheld the lower court’s decision that Achter Land had indeed accepted the contract. The parties’ prior business relationship indicated that the use of the thumbs-up emoji was typical of how they had previously communicated when entering contracts for purchase orders. The Court declared the emoji to be “an action in electronic form that can be used to express acceptance” as per Saskatchewan’s Electronic Information and Documents Act, 2000.

South West Terminal was awarded $82,200 in damages, plus interests and court costs.

The idea that an emoji can amount to a contractual agreement between two parties raises interesting questions about the intersection of law and technology. But Achter Land v. South West Terminal ultimately revolves around the simple notion of acceptance in contract law. Accordingly, it is important for business owners and entrepreneurs to review the basics and fundamentals of business contracts.

The Fundamentals of Business Contracts

While South West Terminal Ltd. v Achter Land is a decision coming out of Saskatchewan courts, Ontario judges may find a decision like this convincing, and may subsequently choose to follow this case law in future decisions. It is therefore important to understand how this case fits into the bigger picture of Canadian contract law.

Types of Business Contracts

A business contract is a legally binding agreement between two or more parties. Entering contracts of various kinds is part and parcel of running a business. Examples of contracts that business owners frequently enter include the following:

It is crucial that business owners ensure their contracts are written clearly and comply with relevant laws and regulations. Doing so is key to preventing problems from arising down the line.

Key Elements of Business Contracts

Each contract is a product of the specific needs and interests of the parties involved. However, six foundational elements are common to nearly all business contracts. These are:

  • Offer: The offer is a proposal by one party (the offeror) to another party (the offeree). The offer contains the terms and conditions of the agreement.
  • Acceptance: Acceptance occurs when the offeree agrees to the terms and conditions of the contract.
  • Consideration: Consideration is the benefit that each party receives upon entering the contract. Consideration is often monetary; however, it can also take other forms, including goods or services, promises, land, etc.
  • Consent: Consent refers to the parties’ understanding of the contract. A valid contract requires voluntary consent.
  • Capacity: Capacity is the legal ability of the parties to enter a contract. It is based on each party’s understanding of the nature and consequences of the agreement. A contract in which one of the parties lacks capacity (due, for example, to mental disability) is not binding.
  • Legality: Contracts must adhere to certain legal standards. Legality ensures that the terms and conditions of the contract are binding and enforceable.

Consequences of Defective Business Contracts

South West Terminal v. Achter Land turned on the first of the six elements—acceptance—as the court considered whether the thumbs-up emoji constituted an electronic signature and could form a valid contract. But a contract that lacks any of the above elements, or is otherwise unclear or ambiguous, can be challenged and can lead to significant issues. Some of the consequences of a defective contract include:

  • Conflicting expectations: Problems might arise when parties have different understandings of the meaning of a contract. In South West Terminal v. Achter Land, for example, the parties had differing beliefs about whether the contract had been accepted.
  • Business losses: Dealing with the fallout from a contract that is unclear, ambiguous or error-ridden can be costly. Businesses might suffer financial losses, reputational damage, missed opportunities, and expensive litigation.
  • Unenforceability: If any elements of a contract are missing, a court can deem it unenforceable. When this occurs, the parties are not legally bound by the terms and conditions contained in the agreement.

When drafting and negotiating contracts, businesses should bear these risks in mind.

Avoiding the Pitfalls of Defective Business Contracts

It is better to be safe than sorry, especially where a contract is concerned. When drafting contracts, businesses should consider implementing the following suggestions:

  • Include all essential elements: A binding contract requires offer, acceptance, consideration, consent, capacity, and legality.
  • Be clear and concise: Avoid language that is complex or convoluted. This can reduce the potential for misunderstandings.
  • Seek a legal opinion: Before signing an agreement, have it reviewed by a qualified lawyer who specializes in business law. They will ensure that the business’s interests are protected and identify any potential issues.

Thoughtful Contracting: Think Before You ‘Emoji’

The main takeaway from South West Terminal v. Achter Land might be to think before you text—especially if you’re tempted to use an emoji when drafting or negotiating a contract. But the case also highlights the importance of understanding the fundamentals of business contracts, particularly that of the contract principle of acceptance. Familiarity with these basic concepts can empower business owners and help them avoid the consequences of a defective contract.

Contact the Corporate and Commercial Lawyers at Baker & Company in Toronto for Advice on Business Contracts

The seasoned corporate and commercial lawyers at Baker & Company regularly guide clients through various business-related matters, including drafting and reviewing complex business contracts. In addition, we help our clients develop comprehensive and practical business strategies to address their ongoing needs and advise them on issues that arise on a day-to-day basis. Call us at 416-777-0100 or reach out to us online to schedule a consultation to learn how we can help you meet your business needs.

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Business Succession Planning

Ensuring a Smooth Transition: Business Succession Planning in Ontario

Business succession planning is a cornerstone of responsible business ownership. It is a strategic process that involves the methodical transfer of ownership and management control to a designated successor. When executed with foresight and meticulous planning, this transition can safeguard a business’s continuity, preserve its value, and minimize potential tax liabilities.

Benefits of Succession Planning for Ontario Businesses

The importance of a well-structured succession plan cannot be overstated. It is a proactive measure that addresses a multitude of critical factors, including:

Preservation of Business Value

A carefully crafted succession plan can maximize a business’s value by ensuring a seamless transition and minimizing disruptions. It helps maintain the business’s reputation, customer relationships, and employee morale, all of which contribute to its overall value.

Continuity of Operations

A well-structured plan allows for a smooth transfer of ownership and management, safeguarding the business’s ongoing operations and ensuring a consistent customer experience. This helps maintain the business’s revenue streams and profitability, which are essential for its long-term success.

Minimization of Tax Implications

Strategic planning can help mitigate tax liabilities associated with the transfer of ownership. This involves careful consideration of various tax instruments and strategies, such as estate freezes, gifting, and the use of trusts. Business owners can develop a tax-efficient succession plan that minimizes their tax burden by working with tax professionals.

Family Harmony

In family businesses, a clear succession plan can prevent familial disputes and maintain harmonious relationships among family members. A well-crafted plan can help ensure that everyone understands their roles and responsibilities and that the transition process is fair and equitable. It can also help preserve family wealth and ensure that the business remains in the family for generations to come.

Key Considerations for Successful Business Succession

1. Identifying and Preparing a Suitable Successor

The selection of a suitable successor is a pivotal decision. The ideal candidate should possess a blend of skills, experience, and a deep-seated commitment to the business. Investing in the successor’s development is crucial, providing them with the necessary training and mentorship to assume leadership responsibilities. This may involve formal education, on-the-job training, and mentorship programs.

It is also essential to consider the successor’s personal qualities, such as their leadership skills, problem-solving abilities, and ability to build relationships.

2. Valuing the Business

A comprehensive business valuation is essential to determine its fair market value. This valuation serves as the foundation for the transfer of ownership and can significantly impact tax implications. Various valuation methodologies, such as asset-based, income-based, and market-based, can be employed to arrive at a reliable valuation.

  • Asset-based valuation involves assessing the value of the business’s tangible assets, such as property, equipment, and inventory.
  • Income-based valuation estimates the business’s future earnings and discounts them to their present value.
  • Market-based valuation involves comparing the business to similar businesses that have been recently sold.

3. Transfer of Ownership

The choice of ownership transfer mechanism depends on various factors, including the nature of the business, the relationship between the owner and the successor, and tax considerations. Common methods include the sale of shares, the sale of assets, and gifting. Each method has its own legal and tax implications, and careful consideration should be given to the most suitable approach.

  • Sale of shares involves selling shares in the corporation to the successor. It is a relatively straightforward process but may trigger capital gains tax.
  • Sale of assets involves selling the business’s assets to the successor. It can be a more complex process, especially for companies with significant assets.
  • Gifting involves giving shares or assets to a successor. It can be a tax-efficient way to transfer ownership, but it may be subject to gift tax and other restrictions.

4. Tax Implications

The tax implications of business succession planning can be complex and vary depending on the specific circumstances. It is crucial to consult with tax professionals to minimize tax liabilities. Key considerations include capital gains tax, income tax, gift tax, and provincial transfer taxes. Tax professionals can help identify strategies to reduce the tax burden associated with the transfer of ownership.

5. Legal Considerations

A well-structured business succession plan should be supported by robust legal documentation. This includes shareholder agreements, partnership agreements, buy-sell agreements, and wills and estate planning documents. Legal counsel can provide guidance on drafting these documents to ensure they align with the succession plan and comply with relevant laws and regulations. Legal counsel can also help to identify and address potential legal issues that may arise during the transition process.

6. Risk Management

A comprehensive succession plan should address potential risks like economic downturns, unforeseen events, and family disputes. Risk management strategies can include diversification, insurance, and contingency planning. Diversification can reduce the impact of economic downturns by spreading risk across different markets and industries. Insurance can provide financial protection in the event of unforeseen events, such as property damage or liability claims.

Contingency planning can ensure that the business can continue to operate in the event of unexpected challenges.

Contact Baker & Company in Toronto for Top-Tier Guidance on Business Succession Planning

Effective business succession planning is a complex endeavour that requires careful consideration and experienced guidance. The knowledgeable corporate and commercial lawyers at Baker & Company help Toronto business owners safeguard their legacy and secure their venture’s future prosperity by providing comprehensive, innovative business succession planning services.

We act as trusted advisors and problem-solvers for enterprises and organizations of all sizes. Please contact us online or call 416-777-0100 to discuss your business law matter with our team.

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Corporate & Commercial Law

Professional Corporations in Ontario: Benefits, Requirements, and Considerations

For many Ontario professionals, incorporating their practice can be an attractive option for several reasons. Professional corporations (sometimes referred to as “PCs”) offer a unique structure that combines the benefits of limited liability with the ability to maintain a professional image.

This blog post serves as a guide to professional corporations in Ontario. It delves into the advantages and drawbacks, outlines the incorporation process, and explores key considerations for professionals contemplating this path.

What is a Professional Corporation?

A professional corporation is a specific type of corporation established under the provincial Ontario Business Corporations Act. Unlike other types of corporations, professional corporations are subject to the requirements outlined in the Ontario Business Corporations Act (also referred to as the “OBCA”), as well as the rules and regulations mandated by their applicable governing body (such as the College of Nurses for Ontario or the Law Society of Ontario). These regulations create specific requirements relating to ownership, professional conduct, and governance within professional corporation structures.

Benefits of Operating as a Professional Corporation

There are numerous advantages to operating as a professional corporation, some of which are described in more detail below:

  • Tax Benefits: Professional corporations offer the potential for professionals to take advantage of certain corporate and personal income tax advantages and other government benefits.
  • Liability Protection: A key benefit of incorporation is limited liability, as a professional corporation generally shields its shareholders from personal liability for the corporation’s debts and obligations. In other words, if your professional corporation is sued or finds itself in financial difficulty, your personal assets (such as your home and vehicle) are typically protected.
  • Enhanced Credibility: Operating as a professional corporation can project a strong professional image and inspire greater confidence among clients, as this corporate structure suggests that you maintain a well-established and organized practice.
  • Growth and Succession Planning: A professional corporation is capable of having many shareholders, allowing others to get involved and take an ownership interest in the business. This is also beneficial when it comes to succession planning, as shares in the corporation can be transferred to new professionals, ensuring the practice’s continuity.

Requirements for Establishing a Professional Corporation

There are specific requirements and steps that a professional must take in order to become a professional incorporation. Thus, it is important to consult with legal and financial professionals to ensure that all steps are correctly completed and are compliant with relevant legislation. Some of the key steps include:

  • Choosing a name: The professional corporation’s name must comply with the strict requirements outlined in the Ontario Business Corporations Act and any additional regulations required by your governing body. The corporation’s name is usually required to contain the professional’s legal name, the professional being practiced (i.e., law, dentistry or medicine) and the words “Professional Corporation.” For professionals seeking to operate their business under a different practice name may be required to file a business name registration.
  • Filing articles of incorporation: In the incorporation process, the articles of incorporation outline the basic structure of the corporation, including the name, share capital, purpose, and initial directors.
  • Obtaining approval from your governing body: Most professional bodies require a practicing individual to obtain their approval before operating as a professional corporation. This process typically involves paperwork and compliance checks to ensure that you meet specific professional and ethical standards.
  • Ensuring ongoing compliance: While a professional corporation must satisfy various requirements in the inception phase, it is crucial for professionals to be aware that they are subject to ongoing compliance obligations, such as annual filings with the government and adherence to the professional regulations set by their respective governing body.

If you have been practicing as a sole proprietor and now wish to operate as a professional corporation, you may be required to complete a section 85 rollover. This allows assets to transfer from a sole proprietorship on a tax-deferred basis. This election allows a taxpayer to defer all or part of the tax consequences typically arising on such a transfer.

Things to Consider Before Incorporating

While professional corporations offer various advantages, there are crucial factors to consider before taking the steps toward incorporation, such as:

  • Costs: Incorporation and ongoing compliance come with associated costs, including filing fees, legal fees and annual corporate maintenance fees, on top of other daily operating expenses.
  • Professional Regulations: Each profession has specific regulations that govern professional corporations operating in that sector. Therefore, it is crucial to thoroughly understand
  • Tax Implications: While tax deferral and other corporate tax advantages can be beneficial, it is important to consult with an experienced accountant who can advise you on the full extent of potential tax implications associated with operating as a professional corporation.
  • Restrictions: The professional corporation must be an Ontario corporation and the individual must only carry on the practice of the specific profession listed.

Final Thoughts on Professional Corporations in Ontario

Deciding whether to operate as a professional corporation is a significant decision for Ontario professionals. However, by carefully weighing the benefits, requirements and considerations outlined in this blog, you can make an informed decision that best suits your needs, goals and financial circumstances. Consulting with a corporate lawyer and accounting professional can also help you become familiar with the legal and financial implications before engaging in the incorporation process. Obtaining professional advice can also help ensure that you are able to navigate the legalities smoothly and maximize the potential benefits of operating as a professional corporation in Ontario.

Contact the Corporate Lawyers at Baker & Company for Advice on Professional Incorporations

The trusted and knowledgeable corporate lawyers at Baker & Company work closely with clients in order to understand their personal and professional goals. Whether you are purchasing a business, or pursuing the path of entrepreneurship for your own business, it is important to understand your present and future rights and responsibilities. At Baker & Company, we help professionals understand their options at every stage, from business planning and tax strategizing to incorporation and succession planning. Contact us at 416-777-0100 or reach out to us online to schedule a consultation with a member of our team and learn how we can assist you.

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Corporate & Commercial Law

Obtaining B Corp Certification: The Process and Benefits for Ontario Businesses

These days, many Ontarians want to “put their money where their mouth is” and support businesses that not only provide the products and services they want, but also represent high environmental and social responsibility standards. As a result, many businesses who align with these values seek out B Corp certification. BCorp certification is a designation indicating that a business meets the highest standards of social and environmental performance, public transparency, and legal accountability. This certification helps businesses differentiate themselves from the competition and communicate their ethos to potential consumers.

As of 2023, there were 149 B Corps headquartered in Ontario, ranging from agricultural support to legal services. With environmental and social responsibility becoming an increasingly important topic, it is anticipated that more and more Ontario businesses will seek out B Corp certification to differentiate themselves from their competitors.

Below, we’ll explain what B Corp certification is, its benefits, and what the certification process entails.

What is B Corp Certification?

B Corp certification is a certification obtained by companies following a rigorous assessment of their social and environmental performance, transparency, and accountability. This designation communicates that the business meets high standards in these areas, and is awarded to qualifying businesses by B Lab, which is a global nonprofit organization.

What are the Benefits of B Corp Certification?

Depending on your business, services, and the types of clients you serve, obtaining B Corp certification can be a critical differentiator, allowing you to attract potential clients and develop trust with them from the outset.

Some of the benefits of obtaining B Corp certification include:

  • Assessing your company’s performance: For many businesses, simply participating in the B Corp certification process can provide a current status assessment. It helps the company better understand where they are at in their performance, including how well the business is being run and what it could be doing better.
  • Differentiating your services in a competitive market: Obtaining B Corp certification can provide your business with a competitive advantage in more crowded service markets where clients are looking for businesses that stand apart from the rest.
  • Establishing credibility and trust with clients: B Corp certification provides clients with a neutral third-party validation of your commitment to social and environmental responsibility. In this sense, obtaining B Corp certification can help establish credibility and show that you truly “walk the walk” when it comes to your stated values.
  • Shaping your business to align with your values: In the same way that B Corp certification can help you attract new clients, it can also help you attract the “right” clients, particularly if working with like-minded clients or consumers who support environmental and social initiatives and value transparency and accountability is important to you.
  • Attracting and retaining talent: If you want to attract employees who live and breathe your company’s ethos, obtaining B Corp certification can be a great stepping stone to find your ideal talent. This certification demonstrates your company’s commitment to creating a positive impact, which can attract like-minded employees and foster a sense of ongoing pride and engagement among staff members.
  • Obtaining investments and capital: Some B Corps find that it is easier to raise funds because of their certification, as it indicates to potential investors that the company is well-managed and adheres to high ethical standards (and thus, lower risk to invest in).

As the above list demonstrates, there are a variety of benefits to obtaining B Corp status, ranging from attracting clients to raising capital, that could potentially appeal to a wide variety of businesses.

How Does a Business Obtain (and Maintain) B Corp Certification?

According to BLab, a business seeking B Corp certification must establish that they:

  • demonstrate high social and environmental performance;
  • will make a legal commitment by changing their corporate governance structure to be accountable to all stakeholders (and not just shareholders) and achieve benefit corporation status if it is available in their jurisdiction; and
  • exhibit transparency by allowing information about their performance to be publicly available on their B Corp profile.

Below is a high-level overview of the steps involved in obtaining B Corp certification, keeping in mind that the specific requirements can vary based on your business’s revenue and company size. For further information on the process, or to determine whether B Corp certification is right for you, be sure to speak with an experienced corporate lawyer for guidance.

Steps For Obtaining B Corp Certification

B Corp certification is not a certification that applies to everyone. Before starting your application, consider whether you are eligible for B Corp certification. If B Corp certification is right for you, you can begin the process by registering for the B Impact Assessment, which measures your business’s performance by reviewing your answers to a series of questions about your governance, worker, community, environment, and customer performance.

Following the B Impact Assessment, you will receive a score. Businesses seeking B Corp certification must obtain at least 80 points to continue on the certification path. Even if your business does not obtain 80 points, the B Impact Assessment can provide important guidance on improving your business’s environmental and social practices.

If you scored 80 points or above, you can then submit your results to B Lab for further consideration. Following B Lab’s review, and assuming no further information is required, you will be eligible for B Corp certification and your business will be registered in the B Corp Directory (along with your B Impact Assessment score and report).

Remember that B Corp certification is only the beginning. To maintain your certification, businesses must update their B Impact Assessment and verify their score every three years.

Final Thoughts on B Corp Certification

While B Corp certification is by no means a requirement, it can, in some cases, be a great differentiating factor for Ontario businesses. Obtaining B Corp certification demonstrates your business’s commitment to broad environmental and social goals, and even initiating the B Corp certification process can help provide great insights into your business’s performance through the B Impact Assessment.

Baker & Company’s Experienced Corporate Lawyers Provide Comprehensive Business Solutions

At Baker & Company, our trusted corporate lawyers provide personalized services for businesses of all sizes. Our business law team provides trusted legal advice and a full range of tailored business solutions to help clients build, structure, and manage their corporate affairs. From our office in Toronto’s financial district, our corporate law team provides clients with practical and proactive legal advice to mitigate risk and resolve issues before they escalate into larger disputes. To learn how we can help you with your business needs, contact us online or call us at 416-777-0100 to speak with a member of our team.

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Business Succession Planning

Ontario Business Succession Planning Essentials

Succession planning is a crucial aspect of any business owner’s life. As entrepreneurs forge ahead, planning for a seamless transition of their enterprise to the next generation or a chosen successor is vital to ensuring the business’s longevity. Business succession planning is not merely a contingency plan but a strategic imperative that requires thoughtful consideration, meticulous preparation, and a comprehensive understanding of the legal and financial implications.

Why Is Succession Planning Important?

Business succession planning involves transferring ownership and management of a business to a new owner, such as an immediate family member or another chosen entity. When planning to leave behind such a legacy, business owners should take adequate time and care in preparing their succession plans. By doing so, they can maximize the ongoing value of the business, minimize disruptions, and be confident, knowing they provided their successors with the resources and knowledge required to help the company continue to grow and succeed.

Some critical considerations for business succession planning are set out below.

A Clear Exit Strategy

When any entrepreneur begins to consider their future within their business, it is essential for them to identify the needs and goals of both themselves and the business well in advance of any transition in leadership. While the planning process may be abstract and non-linear, it is vital to formally identify key elements of the transition as early as possible. While there are numerous considerations to think about, it is important to be forward-thinking in any approach and consider any trends and factors that may impact the daily operations and financial stability of the business to minimize as many unknowns as possible. Addressing potential issues before they arise, such as tax planning, economic trends and the impact of a change in leadership on employees and clients, aids with a seamless transition.

Identify Likely Successors

A business owner should take extensive care and consideration when considering who will take over their business and lead in their footsteps. Sometimes, the business might pass on to the owner’s children or other family members. However, in other circumstances, owners may wish for a key existing management-level employee to take the reins. Alternatively, an owner may want to value and sell their business to an unrelated third party.

Whatever the case, clearly identifying successors is an essential component in succession planning, as it can dictate what direction the succession strategy will go. For example, a child taking over the business may already have the necessary knowledge and training to step in at any time, while an existing management-level employee may require additional training and preparation to step into such a role.

Proactive Financial Planning

In the business world, financial planning is a crucial and ongoing consideration for any business owner. When it comes to succession planning, an entrepreneur must first consider what they must do to ensure the business remains financially stable. Next, they should identify what financial involvement they will have, if any, after stepping away. If an existing owner wishes to remain invested in the business, it is crucial to determine what this arrangement will look like.

Address Estate Planning Concerns

Once a business owner has completed a retirement analysis and has identified likely successors to take over, it is vital to prepare (or update) an estate plan. This is particularly important if the ownership of the business remains within the family, as fair consideration has been given to those individuals through the estate plan, and if the business valuation represents a substantial portion of the estate. Owners may also want to consider an “estate freeze” to help transition the business to a family member. Additional tax and trust options may also be explored to ensure the estate plan adequately considers all involved.

Prepare a “Plan B”

Although preparing a comprehensive business succession plan with the help of an experienced business lawyer is critical, entrepreneurs need to have a “Plan B”. Life can change quickly, and having some type of contingency set in place can make all the difference. This is particularly the case if an accident occurs, rendering an owner unable to make such decisions at a later date, such as a permanent disability or sudden death. By having a backup plan, owners can ensure that new management of the business will be implemented immediately to mitigate any impact on customers, clients, and employees.

Consequences of Poor Planning

Failing to prepare an adequate business succession plan can result in several issues, as set out below.

Operations Disruptions

Without a clear transition plan, a business can be subjected to several interruptions in operations to workflow, employee training, and project timelines. Furthermore, if accounts payable and accounts receivables are not properly maintained throughout the transition, the business may experience deficits and missed payments. All of these disruptions can ultimately impact customer experience and service quality.

Employee Challenges

Without a clear succession plan, business owners may face challenges in retaining employees and maintaining morale. Employees may look for alternative opportunities if they perceive a lack of stability or advancement opportunities within the business. As such, companies risk losing not only key talent but also their institutional knowledge and corporate memory of day-to-day operations. Further, employees may have reduced motivation and accountability when a structural change is poorly planned.

Shareholder and Customer Concerns

Shareholders, clients, and customers may express concerns or lose confidence in the business if they perceive instability during a leadership transition or corporate restructuring. Such a loss of trust and confidence can be difficult to rebuild, ultimately impacting the business’s reputation and bottom line. Uncertainty surrounding the departure of a critical figurehead may also cause stakeholders to revoke their support for the company.

Family Disputes

Poor succession planning can result in family disputes if a business is family-owned or involves several family members. Without a clear plan, disagreements may arise relating to asset distribution, leadership roles, and overall management decisions.

How a Corporate Lawyer Can Help You Prepare Your Succession Plan

If you are starting to think about business succession planning but do not know where to start, an experienced corporate lawyer can help ensure you cover all of your bases and have a sound succession plan in place for when you choose to step away from your enterprise. Not only can a knowledgeable business lawyer help you identify your retirement goals and develop a practical exit strategy, but they can also help you work through the more intricate parts of succession planning. These considerations include transitioning the business to a successor, obtaining a business valuation, and mitigating conflicts that may arise throughout the process.

Once a business succession plan has been prepared, it is essential for any business owner to continue to document any relevant information successors or professionals may need and communicate the future transition plans to everyone involved as early as possible to allow adequate time for preparation.

Contact the Corporate Lawyers at Baker & Company for Trusted Guidance on Business Succession Planning in Toronto

At Baker & Company, our Toronto business succession planning lawyers can help you establish a business succession plan tailored to your needs. We have extensive experience and expertise in providing clients with advice on corporate law and estate law. We can guide you in implementing the plan that works best for you and ensures your business’s future success. Call us at 416-777-0100 or contact us online to schedule an initial consultation with a member of our business law team.

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Corporate & Commercial Law

Considerations for Buying or Selling a Business: Asset vs. Share Sale

There are many moving parts to buying or selling a business. Some key considerations are whether to conduct an asset or share sale, which can direct the process and what kind of due diligence should be conducted. It is important to know the difference between each type before negotiations begin so that you can properly assess the next step in your purchase or sale.

There are advantages and disadvantages to an asset sale compared to a share sale of a business. This blog post will discuss the advantages and disadvantages of an asset or share sale from the perspectives of both the buyer and seller, which can assist in negotiations of buying or selling a business.

What is an Asset Sale or Purchase?

For an asset sale or purchase, the buyer and seller can choose which assets to transfer. Assets can include those that are tangible or intangible. For example, tangible assets can include real property, inventory, and equipment. Intangible assets can include trade names or other intellectual property, goodwill, contracts, permits, and leases.

Asset Sale: Benefits for the Buyer

An asset sale can benefit the buyer as the buyer does not need to assume all of the business’s liabilities as they would for a share sale. This is a primary draw for a buyer to consider an asset purchase over a share sale.

In an asset sale, the buyer is generally not required to keep all of the employees. However, a seller may require the buyer to retain the existing employees or sign new contracts with the employees to avoid liability arising from wrongful dismissal claims.

There are also some tax benefits to the buyer in an asset sale. The buyer is able to increase the tax cost of depreciable assets up to the current market value, which can reduce the buyer’s tax obligations in the future because they can obtain greater deductions in capital cost allowance.

Asset Sale: Disadvantages for the Buyer

Due to the increased taxes that a seller may have to pay in an asset sale, the purchase price may be raised as well.

Asset Sale: Benefits for the Seller

A seller may be able to increase the purchase price in an asset sale, as they may be more complex, or the seller may need to pay more taxes as a result. The seller would maintain some of the liabilities, which may be reflected as an increased purchase price.

Asset Sale: Disadvantages for the Seller

Generally, asset sales can be more complex than a share sale, as it involves transferring individual assets, which can involve a substantial amount of paperwork and documentation to ensure that they are transferred properly. In some cases, obtaining authorization from third parties may be necessary to transfer an asset, which can be costly and time-consuming.

Some of the liabilities would remain with the seller rather than being transferred fully to the buyer.

What is a Share Sale or Purchase?

A share sale involves selling the corporate shares of the business to the buyer. Unlike an asset sale, the assets remain within the company in a share sale.

Share Sale: Benefits for the Buyer

If the company being purchased has significant goodwill associated, it may be beneficial to a buyer to continue operating under the seller’s company name.

The price in a share sale may also be lower since the buyer assumes all of the liabilities.

The seller may need to provide warranties and indemnities to the buyer to cover some of the liabilities that the buyer would otherwise assume in a share sale.

Share Sale: Disadvantages for the Buyer

A key disadvantage for a buyer in a share sale is that they will obtain all of the liabilities associated with the company being purchased. As a result, it is important to ensure that due diligence is properly conducted in order to assess the risks and liabilities that a buyer is taking on. Depending on the liabilities, a buyer may seek to be indemnified by the seller or another party before finalizing the purchase.

In a share sale, the company’s employees generally remain as existing employees after the sale is complete. However, some of the existing employment contracts may allow some employees to exercise certain rights upon the new ownership. As a result, severance obligations may arise, and the buyer would be liable for satisfying these requirements.

Also, in a share sale, the buyer may have a less desirable tax outcome, as it may limit the depreciation that they can claim in the future.

Share Sale: Benefits for the Seller

A share sale may be a more straightforward process for the seller as it involves transferring the shares only. However, in some cases, it may be required to obtain third-party consent before transferring the shares, such as with leases or loan agreements. Depending on the contracts involved, it may also be a straightforward process if there are terms in the contracts to address any third-party consents that may be required.

The seller in a share sale may be able to reduce taxable capital gains and pay fewer taxes overall. The seller may also be able to reduce taxes involved in transferring specific assets, as in an asset sale.

Share Sale: Disadvantages for the Seller

As there are ways to reduce taxes upon a share sale, the buyer may negotiate to buy the company for a lower price.

A seller may have to reduce their price due to the buyer taking on more risk of liabilities upon a share purchase. Also, due to the possibility of significant liabilities that the buyer is taking on, the buyer may require the seller to provide comprehensive warranties and indemnities to cover some of that risk.

Key Takeaways

For an asset sale, the parties can choose which assets to transfer. Generally, a buyer will prefer an asset sale as they do not automatically assume all of the liabilities associated with the company being purchased. An asset sale is also more beneficial tax-wise for the buyer.

A seller may generally prefer a share sale as the liabilities would automatically transfer to the buyer. In a share sale, the seller would have more tax benefits as compared to an asset sale.

The purchase price may fluctuate to reflect each party’s advantages and disadvantages in a sale of a business.

Baker & Company Lawyers in Toronto Can Assist With Buying and Selling Businesses

Choosing how to buy or sell a business through an asset sale or share sale is a significant decision that involves many considerations. There are various advantages and disadvantages to how a business is sold, which depend on the specific circumstances involved. Our trusted corporate lawyers at Baker & Company are experienced with mergers and acquisitions and can assist you with the buying and selling of businesses. Our team is dedicated to providing quality service for all of your unique business needs.

To book a consultation, please contact us online or by phone at 416-777-0100.

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Corporate & Commercial Law

Should Commercial Tenants be Excused From Rental Payments During COVID-19 Lockdowns?

COVID-19 introduced many new challenges for both individuals and businesses across the country. For many businesses, the need to close operations in accordance with pandemic restrictions came with many unknowns, many related to finances and the future of the business. For business owners who conducted operations out of a commercial rental property, it was unclear exactly what rights and obligations tenants and landlords had during such unprecedented times, and these issues continue to be disputed years later. 

In a recent decision from the Court of Appeal for Ontario, a commercial tenant argued that they should not be required to pay commercial rent during the period in which the pandemic restrictions prevented them from accessing the premises they were renting. 

Commercial tenant locked out of building during pandemic

In Niagara Falls Shopping Centre Inc. v. LAF Canada Company, the respondent landlord, owned a shopping centre outside of Toronto, Ontario. The appellant was a shopping centre tenant who operated fitness centres across Canada. The tenant entered into a commercial lease in April 2013 which stated that the tenant paid a monthly amount which combined rent and the tenant’s portion of operating expenses, which exceeded $101,000. 

The Ontario government declared a provincial state of emergency due to the COVID-19 pandemic on March 17, 2020. One week later, the government had mandated the closure of all non-essential workplaces, including gyms and fitness facilities. While the tenant’s business was eventually able to re-open, there were several months of operating interruptions due to surges in the pandemic. In most instances, when the tenant could re-open, it often had to limit and monitor its capacity limits. 

Parties enter into rent deferral agreement 

In May 2020, the tenant and landlord entered into a rent deferral agreement that provided limited rent relief from April to June 2020. This agreement provided that 50% of the base rent was forgiven and 25% was deferred. 

Once the agreement expired, the tenant subsequently paid rent until the end of 2020, despite being open with limited capacity. 

Tenant refuses to pay rent during lockdown

The Ontario government implemented another lockdown on December 26, 2020, at which point the tenant refused to continue to pay rent. The landlord responded to this by bringing an action against the tenant for unpaid rent and other charges. 

The appellant argued that it had no obligation to pay rent during government-mandated closures, relying on the doctrines of frustration and unjust enrichment, and pointing to the Force Majeure Clause (the “Clause”) in the lease. The tenant further counterclaimed for damages exceeding $618,824 and a declaration that:

  1. it was relieved of its obligation to pay rent during periods of government-mandated losures; and
  2. its obligation to pay rent would be reduced proportionately during periods of government-mandated capacity requirements.

Tenant is unsuccessful in defence of position

The landlord moved for a summary judgment, while the tenant did the same. By the time the matter was before the Court in November 2021, the tenant’s business had been closed for approximately nine months.

The motion judge rejected the tenant’s position and accepted the landlord’s argument that the government’s lockdowns constituted “restrictive laws” within the meaning of the Clause. This meant that the landlord was exempt from having to provide the tenant with the use of the rented premises. 

The motion judge also rejected the tenant’s position that the Clause required the lease to be extended for a period equal to the closures, calling the notion “commercially absurd.” Further, the motion judge found that the Clause did not relieve the tenant of its obligation to pay rent.

Tenant Appealed Motion Judge’s Findings

The tenant appealed the decision and asked the Court of Appeal to find that the motion judge erred in their interpretation of the Clause. 

The tenant sought a finding that either both parties should have been delayed from performing their obligations and, therefore, an extension to the lease should be granted. In the alternative, if the tenant was required to pay rent, they sought a lease extension equivalent to the months during which they paid rent for but could not access the premises. 

Court of Appeal Orders Lease Extension

The Court agreed with the tenant that the motion judge had made extricable errors. The Court found that the closure of the premises constituted a force majeure event, thus triggering the Clause. Furthermore, the Court agreed that the lockdown was a “restrictive law.” However, the Court found errors in the motion judge’s decisions following those points of agreement, particularly their comment that the tenant’s position was “commercially absurd.” 

The Court wrote that the motion judge made an error in interpreting the word “excuse” to me “exempted,” in reference to the finding that the respondent was not obligated to provide the appellant with access to the building. Instead, the Court of Appeal held that the obligation could be excused, but that the respondent then had an obligation to extend the rental period for a specific period of time after the lease expired. 

The Court allowed the appeal and declared that the landlord was excused from their performance under the lease to provide access to the premises during government-mandated closure periods. The Court also ordered that the lease was extended by the extension period, during which time the tenant is not required to pay rent. 

The Experienced Real Estate Lawyers at Baker & Company in Toronto Advise on Commercial Leasing Disputes

At Baker & Company, our experienced real estate lawyers work closely with each client to understand exactly what their needs are when dealing with commercial and residential real estate matters. We help clients manage a variety of real estate disputes and ensure that they receive comprehensive legal advice which will allow them to manage risk and make sound decisions throughout the dispute and resolution process. To arrange a consultation with a member of our real estate team, contact us online or call us at 416-777-0100.

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Corporate & Commercial Law

Buyer Successfully Rescinds Franchise Agreement

When buying or selling an existing business, it is essential to ensure the potential buyer is aware of all information relevant to the sale. Sellers must also be mindful of additional requirements set out in industry-specific legislation.

This blog discusses a recent case where the seller of a franchise did not meet applicable disclosure requirements. This resulted in a hefty damages award after the buyer rescinded the agreement a year later.

Buyer wanted to acquire a news franchise

In 1901709 Ontario Inc. et al. v. Dakin News Systems Inc., two parties sought to strike a deal for one to acquire the franchise of another. The plaintiff, Mr. Tan, wanted to increase his income and found an opportunity in Mr. Ashtiani, who operated an International News franchise in Toronto and was looking to sell. The parties entered an Agreement of Purchase and Sale to transfer the franchise to Mr. Tan in trust (through his corporation, the other plaintiff, 1901709 Ontario Inc). 

The sale would go through on the condition that the franchisor approved and the landlord consented to the lease being reassigned. The franchisor and landlord, Dakin News, agreed to the sale and had Mr. Tan sign a franchise agreement and a sublease agreement. Mr. Tan provided Dakin News with several fees.

Buyer tried to pull out of purchase a year later

Mr. Tan, through 1901709 Ontario Inc., operated the store from March 2014 to April 2015. In April 2015, he sought to rescind the franchise agreement. Mr. Tan wanted to recoup his losses because, he alleged, Dakin News had not provided him with adequate disclosure as required by the Arthur Wishart Act (Franchise Disclosure). Section 5 of that Act reads as follows:

Franchisor’s obligation to disclose

5 (1) A franchisor shall provide a prospective franchisee with a disclosure document and the prospective franchisee shall receive the disclosure document not less than 14 days before the earlier of,

(a) the signing by the prospective franchisee of the franchise agreement or any other agreement relating to the franchise, other than an agreement described in subsection (1.1); and

(b) the payment of any consideration by or on behalf of the prospective franchisee to the franchisor or franchisor’s associate relating to the franchise, excluding the payment of a deposit if it,

(i) does not exceed the prescribed amount,

(ii) is refundable without any deductions, and

(iii) is given under an agreement that in no way binds the prospective franchisee to enter into a franchise agreement.

Dakin News responded that it did not believe any disclosure was required. Subsection 5(7) of the Arthur Wishart Act waives the disclosure requirement if a third party purchases the franchise from an existing franchisee. As a result, the central issue was whether Dakin News was required to provide disclosure to Mr. Tan and his trust company, 1901709 Ontario Inc.

Was the six-step approval process enough to fulfill disclosure?

In addition to the required approval by Dakin News of the sale of the franchise and assignment of the lease, Dakin News imposed a six-step procedure upon Mr. Tan’s company. The steps were as follows:

  1. “Email us the lawyers’ (the buyers’ and the seller’s) contact information which includes the name, address, telephone number, fax number and email address.
  2. Fax or email us a copy of the Purchase and Sale Agreement
  3. BUYER to provide the following information through the SELLER or its Solicitor:
  1. The last mortgage statement showing principle [sic], interest amounts and current balance outstanding
  2. Letter from financial institution confirming cash on hand, stocks, bonds, other investments, debts and loans
  3. Current credit card balances
  4. Articles of Incorporation listing of all shareholders and directors
  5. Completed Franchise application
  1. SELLER to provide a certified document (from your accountant) showing the total gross sales (which includes HST) for the last 12 months immediately preceding the transfer.
  2. BUYER to obtain a Bulk Sales Act from the SELLER through your lawyer to make sure all debts (the seller’s) have been settled before the transfer. This document does not have to be handed over to us. BUYER to have their lawyer do a “holdback” on the funds you are going to release to the SELLER to cover any rental adjustments that are still to come. The Landlord does not have the reconciled numbers until at least 3 to 9 months (in the majority of the cases) after the end of the current year.

When we receive all of the above to our satisfaction, the BUYER AND SELLER shall be contacted AND THE BUYER will be asked to come in for an interview.

  1. A transfer date will then be determined by Operations Department provided there are no more outstanding issues and all funds are in from both parties and the new Franchise and Sublease Agreements are signed.”

Rescission fee demanded from buyer after approval process completed

The plaintiffs completed all the steps on January 27, 2014. In July 2014, Mr. Tan received a letter from Dakin News advising of plans to rebrand the International News franchise. This would require payment of $75,000 in three installments for the refurbishment. Since the franchise agreement and sublease were set to expire in May 2015, Mr. Tan was obligated to accept this, even though 1901709 Ontario Inc. had already paid a renewal fee.

For this reason, the company issued its Notice of Recission in May 2015 under section 5 of the Arthur Wishart Act. Mr. Tan sought refunds of the purchase price, inventory and supply costs, losses incurred from the franchise’s acquisition, and damages under the Arthur Wishart Act. 

Dealings between franchisor and new franchisees require disclosure

Under section 6(2) of the Arthur Wishart Act, a franchisee can rescind the franchise agreement without penalty if disclosure requirements are not met. The time limitation to do this is within two years of signing the franchise agreement. If Dakin News believed it to be exempt from disclosure requirements, it would have to prove this fact under section 12 of the Act.

While Mr. Tan’s initial contact with the franchise was through an existing franchisee, Mr. Ashtiani, the Ontario Superior Court found that the deal ultimately struck was with the franchisor, Dakin News. Dakin News required Mr. Tan to enter an entirely new agreement and sublease. It also demanded Mr. Tan pay an inventory fee of $20,000, even though Mr. Tan had purchased Mr. Ashtiani’s existing inventory. The Court found that the exemption set out in section 5(7) of the Arthur Wishart Act as Dakin News was the party that had effected the grant of the franchise.  As a result, Dakin News could not use its existing franchisee to shield it from its statutory disclosure obligations.

The franchisor was obligated to pay the franchisee who rescinded the agreement

As a result of the above analysis, the Court concluded that Mr. Tan and 1901709 Ontario Inc. were entitled to rescind the franchise agreement under section 6(2) of the Arthur Wishart Act. The Court ordered that Dakin News and its associates were liable to pay 1901709 Ontario Inc. a sum of $32,048. This sum was to reimburse Mr. Tan and 1901709 Ontario Inc. for training, the security deposit, and royalties. The Court added $1,123 in damages for inventory costs. Finally, Mr. Tan and 1901709 Ontario Inc. were to be reimbursed $51,274 for the operating losses incurred.

Baker & Company Provides Trusted Advice on Mergers, Acquisitions, and Franchise Agreements in Toronto

The knowledgeable corporate and commercial lawyers at Baker & Company provide reliable advice and innovative legal solutions to entrepreneurs looking to start or grow a business. Whether you are a new or seasoned business owner, we help navigate the business law landscape and ensure your company is structured to maximize profitability and avoid risk. Our team advises on all aspects of mergers and acquisitions, as well as franchise agreements (especially pertaining to hotel law). To speak with a member of our business law team, please call 416-777-0100 or contact us online.

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Corporate & Commercial Law

Ontario Launches New Website to Help Entrepreneurs

Ontario’s Ministry of Economic Development, Job Creation and Trade recently announced the introduction of a new Business, Workplace, and Economy website to help entrepreneurs start new businesses in the province. The site provides access to information and services to support business growth and job creation.

Entrepreneur Website Part of Fewer Fees, Better Services Act

The Business, Workplace, and Economy website connects entrepreneurs to resources and free personalized help in applying for funding, tax credits, and registering their business. The website was created under the initiatives developed by the Fewer Fees, Better Services Act, which received royal assent on March 3, 2022. The preamble of the Fewer Fees, Better Services Act states:

“Ontario is committed to reducing administrative burdens for those seeking permits, licences, information or any other type of government approval and improving the overall experience for the user by making it easier to access required information and services.

Ontario is dedicated to increasing predictability and keeping government accountable.”

The website is part of the provincial government’s efforts to cut red tape and reduce burdensome administrative and regulatory requirements. Minister of Economic Development, Job Creation and Trade Vic Fedeli stated that the site demonstrates that the province has “listened to business owners” and will raise the bar for customer service.

As per Associate Minister of Small Business and Red Tape Reduction Nina Tangri:

“With the launch of the new website, we’re taking the first step toward a holistic, start-to-finish approach to allow entrepreneurs to more effectively interact with government in meeting the requirements to get their business up and running.”

Helping Entrepreneurs Start a Business 

The Business, Workplace, and Economy website connects entrepreneurs to information and guides about:

Business Closures

In addition to helping Ontario business owners start an enterprise, the website also provides information about issues relating to closing a business, including succession planning, selling a business, account closures, and bankruptcy.

Small Business Enterprise Centres

Small Business Enterprise Centres are located throughout Ontario and offer advisory services and workshops on foundational entrepreneurial skills. These centres provide support, mentorship, training, and grant opportunities to new business owners. Entrepreneurs can search by postal code to determine the location of the nearest Small Business Enterprise Centre.

Information About Funding Opportunities 

Depending on the type of business and services offered, Ontario business owners may be eligible for various programs, grant opportunities, and funding relating to:

The website also offers financing advice, mentoring, and support for aspiring business owners between the ages of 18 and 39.

Funding for businesses looking to expand or bring business to their community is, in some cases, specific to the region in which the company seeks to operate: Eastern Ontario, Northern Ontario, Southwestern Ontario, or Rural Ontario.

Employment Laws & Workplace Insurance

Ontario entrepreneurs can use the new website to access information about their rights and obligations as an employer under the Employment Standards Act and the Occupational Health and Safety Act.

To ensure compliance with accessibility laws, the site provides free training about employee accessibility requirements and standards, including mandatory accessibility reporting for businesses or non-profit organizations with 20 or more employees.

Businesses can also determine whether they need workplace insurance for wage-loss benefits, medical coverage, and support for employees suffering work-related injuries or illnesses. Additionally, entrepreneurs can research business insurance to protect against loss or damage to physical property or the loss of operation and income.

Indigenous Business Development Toolkit

The Indigenous Business Development Toolkit aims to provide support and resources to Indigenous persons in Ontario looking to start or expand a business. The toolkit includes a list of Indigenous financial institutions that can assist with business planning and instructions for bidding on government contracts that benefit Indigenous people and communities.

In addition to the toolkit, Indigenous entrepreneurs are encouraged to read the First Nations Community Economic Development Guide for practical advice, case studies, and economic development resources for boosting their community’s local economy.

Export and Trade 

In addition to provincially-focused business matters, the Business, Workplace, and Economy website provides information on growing a business nationally and internationally. It offers information about international trade programs and events, including exhibitions, seminars, and workshops, across multiple sectors and market regions. 

Ontario-based businesses can use the site to find trade missions, market research, trade insurance options, and funding opportunities.

Contact Baker & Company in Toronto for Trusted Business Law Advice

The knowledgeable corporate and commercial lawyers at Baker & Company provide reliable advice and innovative legal solutions to entrepreneurs looking to start or grow a business. Whether you are a new or seasoned business owner, we help navigate the business law landscape and ensure your company is structured to maximize profitability and avoid risk. To speak with a member of our business law team, please call 416-777-0100 or contact us online. 

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Business Succession Planning Corporate & Commercial Law

Budget 2022 Proposes Amendments to the Competition Act and Other Changes to Assist Businesses

Recently, Minister of Finance Chrystia Freeland presented the federal government’s 2022 Budget Implementation Act which included reforms aimed at “making Canada’s economy more competitive.”

Making Canada’s Economy More Competitive 

The Competition Act (the “Act”) is a federal law governing competition in Canada aimed at maintaining competition by regulating anti-competitive practices. It is enforced and administered by the Competition Bureau, and cases are adjudicated by the Competition Tribunal. The Act contains both criminal and civil enforcement provisions, including imprisonment and/or fines for failing to comply with the Act.

The purpose of the Act is:

…to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.

Budget 2022 specifically announces the government’s intention to introduce legislative amendments to the  Act as a preliminary phase in modernizing the competition regime. This will include fixing loopholes; tackling practices harmful to workers and consumers; modernizing access to justice and penalties, and adapting the law to today’s digital reality.

As Budget 2022 states:

“A competitive economy is a fair, growing, and innovative economy. In this regard, the government will consult broadly on the role and functioning of the Competition Act and its enforcement regime. However, there are also shortcomings in the Act that can easily be addressed and move Canada in line with international best practices.”

These proposed changes come on the heels of a call from the Commissioner of Competition for “a comprehensive review of the Competition Act.” The Commissioner further noted that “[w]e need to have a debate in Canada about what our competition law should look like in the 21st century.” In September 2021, Edward M. Iacobucci, Toronto Stock Exchange Chair in Capital Markets Regulation, released a consultation paper which examined the application of the Act in the new digital age. In response, the Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry, issued a statement on affordability and competition in Canada’s telecommunications sector, stating that the government would be reviewing the Act and considering amendments in order to modernize it:

“In recognition of the critical role of the Competition Act in promoting dynamic and fair markets, the Minister will also carefully evaluate potential ways to improve its operation.”

The Act has not been frequently amended with the last comprehensive revisions having been done in 1986 and the most significant amendments dating back to 2009.  While new amendments are expected, it is still not certain which competition laws will be changed and how. The competition law community continues to speculate on just how the Act will be reformed. 

Driving Investment and Growth for Small Businesses 

Budget 2022 also intends to address the barriers that are preventing small businesses from growing. This includes reducing payment card fees for merchants. It will also help Canadian businesses make the most of global trade opportunities, while better protecting Canadian businesses against unfair competition.

Creating a Canadian Innovation and Investment Agency 

Budget 2022 announces the government’s intention to create an operationally independent federal innovation and investment agency, and proposes $1 billion over five years, starting in 2022-23, to support its initial operations. Final details on the agency’s operating budget are to be determined following further consultation later this year.

The new innovation and investment agency will proactively work with new and established Canadian industries and businesses to help them make the investments they need to innovate, grow, create jobs, and be competitive in the changing global economy. The government will consult further with both Canadian and global experts in finalizing the design and mandate of the new agency, with details to be announced in the 2022 fall economic and fiscal update.

Launching the Canada Growth Fund 

Budget 2022 proposes to establish the Canada Growth Fund to attract substantial private sector investment to help meet important national economic policy goals:

  • To reduce emissions and contribute to achieving Canada’s climate goals
  • To diversify our economy and bolster our exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada’s industrial base; and
  • To support the restructuring of critical supply chains in areas important to Canada’s future prosperity—including our natural resources sector.

The Canada Growth Fund will be a new public investment vehicle that will operate at arms-length from the federal government. It will invest using a broad suite of financial instruments including all forms of debt, equity, guarantees, and specialized contracts. The fund will be initially capitalized at $15 billion over the next five years. It will invest on a concessionary basis, with the goal that for every dollar invested by the fund, it will aim to attract at least three dollars of private capital.

In creating the Canada Growth Fund, the government intends to seek expert advice from within Canada and abroad. Following these consultations, details about the launch of the fund will be included in the 2022 fall economic and fiscal update. Funding for the Canada Growth Fund will be sourced from the existing fiscal framework.

Contact the Corpoate Lawyers at Baker & Company in Toronto for Assistance with Corporate Law Issues   

The knowledgeable team of corporate lawyers at Baker & Company will continue to monitor for changes to the Act and how competition law reform may impact your corporation and business practices. We can assist your company in proactively responding to today’s business environment, whether you are a small or large size organization and tailor responsive and strategic legal solutions to meet your company’s individual needs. To speak with a lawyer about employment policies or any other employment law issue, contact us online or by phone at 416-777-0100.